What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-14 compared with 2021-02-12 · 109 added, 129 removed, 710 unchanged (25% of the section changed)

18 unchanged sentences

Income taxes payable 15,631 4,015

Notes payable, current 239 218

Notes payable — 239

Current operating lease liabilities 83,787 78,604

Total current liabilities 1,358,673 1,046,626

Notes payable, less current portion — 239

Noncurrent operating lease liabilities 181,291 223,869

24 unchanged sentences

Selling, general and administrative expenses 1,951,282 1,666,041 1,958,295

(Income) loss from investments held in employee deferred compensation trusts

(which is completely offset by related costs and expenses - Notes A & I)

( 75,188 ) ( 54,917 ) 11,486

Income from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I) ( 61,078 ) ( 75,188 ) ( 54,917 )

Amortization of intangible assets 2,241 1,219 1,361

40 unchanged sentences

Net income — — — — 306,276 306,276

Adoption of accounting pronouncement — — — — ( 558 ) ( 558 )

Other comprehensive income (loss) — — — 15,254 — 15,254

6 unchanged sentences

Net income — — — — 598,626 598,626

Adoption of accounting

pronouncement

( 558 ) ( 558 )

Other comprehensive income (loss) — — — ( 17,890 ) — ( 17,890 )

19 unchanged sentences

Amortization of intangible assets 2,241 1,219 1,361

Realized and unrealized (gains) losses from investments held in employee deferred

compensation trusts

( 66,866 ) ( 44,492 ) 22,343

Realized and unrealized gains from investments held in employee deferred compensation trusts ( 37,359 ) ( 66,866 ) ( 44,492 )

Stock-based compensation 55,932 52,486 48,300

4 unchanged sentences

Accounts payable and accrued expenses 52,610 1,098 ( 9,204 )

Accrued payroll and benefit costs 119,231 17,705 13,845

Accrued payroll and benefit cost 99,005 119,231 17,705

Employee deferred compensation plan obligations 100,058 13,923 87,670

7 unchanged sentences

Payments for acquisitions, net of cash acquired — ( 15,836 ) —

Net cash flows provided by (used in) investing activities 9,461 ( 102,138 ) ( 88,509 )

Net cash flows (used in) provided by investing activities ( 87,609 ) 9,461 ( 102,138 )

CASH FLOWS FROM FINANCING ACTIVITIES:

21 unchanged sentences

(the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps ® , Robert Half ® Finance & Accounting , OfficeTeam ® , Robert Half ® Technology , Robert Half ® Management Resources , Robert Half ® Legal , The Creative Group ® , and Protiviti ® .

The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of contract, full-time, and senior-level project professionals in the fields of accounting and finance.

OfficeTeam specializes in highly skilled contract administrative support professionals.

The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance.

OfficeTeam specializes in highly skilled temporary administrative support professionals.

Robert Half Technology provides project and full-time technology professionals.

Robert Half Legal provides contract, project, and full-time staffing of lawyers, paralegals and legal support personnel.

Robert Half Legal provides temporary, project, and full-time staffing of lawyers, paralegals and legal support personnel.

The Creative Group provides interactive, design, marketing, advertising and public relations professionals.

11 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates include allowances for uncollectible accounts receivable, variable consideration, workers’ compensation losses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.

Such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, accrued medical expenses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.

We continue to monitor the global economic uncertainty as a result of cornavirus (“COVID-19”) and its variants to assess the impact on the Company’s results of operations, financial condition and liquidity.

Actual results and outcomes may differ from management’s estimates and assumptions.

We are continuing to monitor the efforts to mitigate the spread of coronavirus (“COVID-19”), including uncertainty

around the duration and extent of the stay-at-home orders and the effect on the Company’s results of operations, financial

condition, and liquidity.

In light of the ongoing economic disruption, we continue to face a greater degree of uncertainty than

normal in making the judgments and estimates needed to apply the Company’s significant accounting policies.

As the situation

continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful

impacts to the Company’s financial statements in future periods.

Actual results and outcomes may differ from management’s

estimates and assumptions.

Service Revenues.

4 unchanged sentences

Costs of Services.

Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses.

Direct costs of temporary and consultant staffing consist of professional staff payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses.

Direct costs of permanent placement staffing services consist of reimbursable expenses.

3 unchanged sentences

Advertising costs were $ 49.3 million, $ 37.2 million and $ 54.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Income) loss from investments held in employee deferred compensation trusts .

The Company has changed its Consolidated Statements of Operations to separately present (income) loss from investments held in employee deferred compensation trusts.

Income from Investments Held in Employee Deferred Compensation Trusts .

Under the Company’s employee deferred compensation plans, employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trusts consistent with these directions.

2 unchanged sentences

The value of the related investment trust assets also changes by an equal and offsetting amount, leaving no net cost to the Company.

The Company’s (income) loss from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

Such amounts were previously presented as a component of selling, general and administrative expenses, or, in the case of risk consulting and internal audit services, costs of services.

Reclassifications have been made to prior year’s consolidated financial statements to conform to the current presentation.

The following table presents the Company’s (income) loss from investments held in employee deferred compensation trusts (in thousands):

The Company’s income from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s income from investments held in employee deferred compensation trusts (in thousands):

Year Ended December 31,

1 unchanged sentence

Dividend income $ 23,719 $ 8,322 $ 10,425

Realized and unrealized (gains) losses ( 66,866 ) ( 44,492 ) 22,343

$ ( 75,188 ) $ ( 54,917 ) $ 11,486

Realized and unrealized gains 37,359 66,866 44,492

Income from investments held in employee deferred compensation trusts $ 61,078 $ 75,188 $ 54,917

Comprehensive Income (Loss).

12 unchanged sentences

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value because of their short-term nature.

The Company holds mutual funds and money market funds to

satisfy its obligations under its employee deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1).

The Company holds mutual funds and money market funds to satisfy its obligations under its employee deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26 unchanged sentences

The Company is exposed to credit losses resulting from the inability of its customers to make required payments.

The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, current business conditions and macro-economic trends.

The Company considers risk characteristics of trade receivables based on asset type, size, term, and geographical locations to evaluate trade receivables on a collective basis.

The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, age of customer receivable balances, current business conditions and macro-economic trends.

The Company considers risk characteristics of trade receivables based on asset type and geographical locations to evaluate trade receivables on a collective basis.

The Company applies credit loss estimates to these pooled receivables to determine expected credit losses.

The following table sets forth the activity in the allowance for credit losses from December 31, 2019, through December 31, 2020 (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the activity in the allowance for credit losses from January 1, 2020, through December 31, 2021 (in thousands):

Allowance for Credit Losses

Balance as of December 31, 2019

Adoption of accounting pronouncement 558

Balance as of January 1, 2020

3 unchanged sentences

Balance as of December 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Charges to expense 9,464

Deductions ( 6,827 )

Other, including translation adjustments ( 724 )

Balance as of December 31, 2021

Property and Equipment .

6 unchanged sentences

Internal-use Software.

The Company capitalizes direct costs incurred in the development of internal-use software.

Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets.

All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the Consolidated Statements of Financial Position.

Capitalized internal-use software development costs were $ 40.6 million, $ 35.6 million, and $ 3.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company develops and implements software for internal use to enhance the performance and capabilities of the operating technology infrastructure.

Direct costs incurred for the development of internal-use software are capitalized from the time when the completion of the internal-use software is considered probable until the software is ready for use.

All other preliminary and planning stage costs are expensed as incurred.

Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other current assets, while all other capitalized internal-use software development costs are reported as a component of computer software within property and equipment on the Consolidated Statements of Financial Position.

Capitalized software costs are amortized using the straight-line method over the estimated useful life of the software, ranging from two to five years .

The Company determines if a contractual arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s Consolidated Statements of Financial Position.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Consolidated Statements of Financial Position.

The Company does not currently have finance leases.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

The lease payments included in the present value are fixed lease payments and index-based variable lease payments.

Operating lease ROU assets and liabilities are recognized at the possession date (generally this is the commencement date) of the lease based on the present value of lease payments over the lease term.

The lease payments included in the present value are fixed lease payments and fixed management fees.

The operating lease ROU assets include any payments made before the commencement date and exclude lease incentives.

As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments.

The Company applies the portfolio approach in applying discount rates to its classes of leases.

The operating lease ROU assets include any payments made before the commencement date and exclude lease incentives.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company does not currently have subleases.

The Company does not have any material subleases.

The Company does not currently have residual value guarantees or restrictive covenants in its leases.

The Company has contracts with lease and non-lease components, which are accounted for on a combined basis.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Intangible Assets .

Goodwill and intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at the date of acquisition.

Identifiable intangible assets are amortized over their useful lives, typically ranging from two to five years .

Identifiable intangible assets are amortized over their lives, typically ranging from two to five years .

Goodwill is not amortized, but is tested at least annually for impairment.

The Company completed its annual goodwill impairment assessment as of June 30 in each of the years ended December 31, 2020, 2019, and 2018, and determined that no adjustment to the carrying value of goodwill was required.

The Company completed its annual goodwill impairment assessment during the second quarter in each of the years ended December 31, 2021, 2020 and 2019, and determined that no adjustment to the carrying value of goodwill was required.

There were no events or changes in circumstances during the six months ended December 31, 2021, that caused the Company to perform an interim impairment assessment.

11 unchanged sentences

If such losses are ultimately utilized to offset future segment income, the Company will recognize a tax benefit up to the full amount of the valuation reserve.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Workers’ Compensation .

6 unchanged sentences

While management believes that its assumptions and estimates are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future results.

Accrued Medical Expenses.

The Company offers several medical plans to its employees and retains the economic burden for the first $ 1.0 million per claimant per year in medical claims.

Claims in excess of $ 1.0 million per year per claimant are insured.

Medical expense includes the insurance premiums for claims in excess of $ 1.0 million, claims administration fees, prescription fees and reimbursements, and an estimate for the Company’s liability for IBNR claims and for the ongoing development of existing claims.

Medical expenses are presented as a component of selling, general and administrative expenses, or in the case of risk consulting and internal audit services, costs of services in the Consolidated Statements of Operations.

The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period includes estimates.

The Company has established reserves for medical claims using rates which are estimated using periodic third-party actuarial valuations based upon historical loss statistics which include the Company’s historical claims data, and an estimate of future claim trends.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Translation.

7 unchanged sentences

The Company recognizes compensation expense equal to the grant-date fair value for all stock-based payment awards that are expected to vest.

This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to performance conditions, in which case the Company recognizes compensation expense over the requisite service period of each separate vesting tranche.

This expense is recorded on a straight-line basis over the requisite service period of the entire award.

The Company determines the grant-date fair value of its restricted stock and stock unit awards using the fair market value of its stock on the grant date, unless the awards are subject to market conditions, in which case the Company utilizes a binomial-lattice model (i.e., Monte Carlo simulation model).

The Monte Carlo simulation model utilizes multiple input variables to determine the stock-based compensation expense.

The Monte Carlo simulation model utilizes multiple input variables to determine the stock-based compensation fair value.

No stock appreciation rights have been granted under the Company’s existing stock plans.

The Company has not granted any options to purchase common stock since 2006.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note B—New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Current Expected Credit Losses Model.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses.

The new guidance was effective for interim and annual reporting periods beginning after December 15, 2019.

The Company adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

Simplifying the Test for Goodwill Impairment.

In January 2017, the FASB issued authoritative guidance to simplify the goodwill impairment testing process.

The new standard eliminates Step 2 of the goodwill impairment test.

If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2.

The new guidance was effective for the Company for fiscal years beginning after December 15, 2019, although early adoption was permitted.

The Company adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

Reference Rate Reform.

7 unchanged sentences

Recently Issued Accounting Pronouncements Not Yet Adopted

Government Assistance.

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance" to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements.

This standard is effective for annual periods beginning after December 15, 2021.

The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or (2) retrospectively to those transactions.

This guidance is effective for annual periods beginning after December 15, 2021.

The Company believes the adoption of this guidance will not have a material impact on its financial statements.

Note C—Revenue Recognition

4 unchanged sentences

Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues, and equivalent amounts of reimbursable expenses are included in costs of services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Temporary and consultant staffing revenues.

6 unchanged sentences

Fees paid to Time Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Permanent placement staffing revenues.

1 unchanged sentence

The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90 -day guarantee period.

These amounts are established based primarily on historical data and are recorded as contract liabilities.

These amounts are established based primarily on historical data and are recorded as liabilities.

Fees to clients are generally calculated as a percentage of the new employee’s annual compensation.

24 unchanged sentences

The term between invoicing and when payment is due is not significant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement.

2 unchanged sentences

As of December 31, 2020, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $ 134.9 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the Consolidated Statements of Financial Position.

The following table sets forth the activity in contract liabilities from January 1, 2018 through December 31, 2020 (in thousands):

Balance as of January 1, 2018 $ 9,003

The following table sets forth the activity in contract liabilities from December 31, 2018, through December 31, 2021 (in thousands):

Balance as of December 31, 2018 $ 12,997

Payments in advance of satisfaction of performance obligations 13,030

13 unchanged sentences

Prepaid expenses $ 69,526 $ 56,157

Unamortized cloud computing implementation costs 44,692 41,517

Other 55,646 49,841

12 unchanged sentences

The Company has operating leases for corporate and field offices, and certain equipment.

The Company’s leases have remaining lease terms of 1 month to 9 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

Operating lease expense was $ 81.5 million and $ 77.7 million for the years ended December 31, 2020, and 2019, respectively.

Rental expense, primarily for offices premises, was $ 89.4 million for the year ended December 31, 2018.

The Company’s leases have remaining lease terms of 1 year to 8 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

Operating lease expense was $ 86.6 million, $ 81.5 million and $ 77.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Supplemental cash flow information related to leases consisted of the following (in thousands):

Year Ended December 31,

2021 2020 2019

Cash paid for operating lease liabilities $ 91,253 $ 84,569 $ 78,152

Right-of-use assets obtained in exchange for new operating lease liabilities 37,786 32,170

Right-of-use assets obtained in exchange for operating lease liabilities from new leases $ 20,038 $ 37,786 $ 32,170

Right-of-use assets obtained in exchange for operating lease liabilities from lease

modifications or reassessments

$ 31,433 $ 64,221 $ 32,122

Supplemental balance sheet information related to leases consisted of the following:

Weighted average remaining lease term for operating leases 4.5 years 4.8 years

Year Ended December 31,

2021 2020 2019

Weighted average remaining lease term for operating leases 3.9 years 4.5 years 4.8 years

Weighted average discount rate for operating leases 2.3 % 2.6 % 3.0 %

5 unchanged sentences

(a) Includes current portion of $ 83.8 million for operating leases.

As of December 31, 2020, the Company had no material future minimum lease obligations that had not yet commenced.

As of December 31, 2021, the Company had additional future minimum lease obligations totaling $ 10.7 million under executed operating lease contracts that had not yet commenced.

These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 6 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3 unchanged sentences

Balance as of December 31, 2019

$ 134,210 $ 26,097 $ 50,057 $ 210,364

Acquisitions (a) — — 12,199 12,199

Foreign currency translation adjustments 301 83 108 492

Balance as of December 31, 2020

Acquisitions (a) — — 12,199 12,199

$ 134,511 $ 26,180 $ 62,364 $ 223,055

Foreign currency translation adjustments 73 9 ( 282 ) ( 200 )

Balance as of December 31, 2021

$ 134,584 $ 26,189 $ 62,082 $ 222,855

(a) In December 2020 the Company, through its wholly owned subsidiary Protiviti, acquired Identropy, Inc., an independent security consulting firm specializing in advisory, implementation and managed services for identity, access management and access governance solutions.

6 unchanged sentences

Accrued payroll and benefit costs $ 540,183 $ 397,877

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $ 102.2 million of applicable payroll taxes as of December 31, 2020, of which $ 51.1 million is expected to be paid during the next 12 months and is included in accrued payroll and benefit costs and the remaining $ 51.1 million is included in other liabilities on the Consolidated Statements of Financial Position.

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $ 51.1 million and $ 102.2 million of applicable payroll taxes as of December 31, 2021 and December 31, 2020, respectively.

The remaining deferred payroll balance of $ 51.1 million is expected to be paid during the next 12 months and is included in payroll and benefits.

Note I—Employee Deferred Compensation Plan Obligations

4 unchanged sentences

These plans include provisions for salary deferrals and Company matching and discretionary contributions.

The asset value of the nonqualified plans was $ 406.6 million and $ 398.4 million as of December 31, 2020 and 2019, respectively.

The Company holds these assets to satisfy the Company’s liabilities under its employee deferred compensation plans.

The liability value for the nonqualified plans was $ 435.1 million and $ 421.2 million as of December 31, 2020 and 2019, respectively.

Deferred compensation plan and other benefits related to the Company’s executive chairman was $ 91.8 million as of December 31, 2019, and was included in the liability value for the nonqualified plans.

The Company paid out the full balance of this plan during the year ended December 31, 2020.

The asset value of the nonqualified plans was $ 495.0 million and $ 406.6 million as of December 31, 2021 and December 31, 2020, respectively.

The Company holds these assets to satisfy the Company’s liabilities under its deferred compensation plans.

The liability value for the nonqualified plans was $ 535.3 million and $ 435.1 million as of December 31, 2021 and December 31, 2020, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3 unchanged sentences

Contribution expense $ 47,119 $ 42,092 $ 26,122

Employee deferred compensation expense (income) related to changes in the fair

value of trust assets

75,188 54,917 ( 11,486 )

Increase in employee deferred compensation expense related to changes in the fair value of trust assets 61,078 75,188 54,917

$ 108,197 $ 117,280 $ 81,039

1 unchanged sentence

Note J—Notes Payable

The Company has a promissory note payable with a balance of $ 0.2 million at December 31, 2020, and $ 0.5 million at December 31, 2019, which bears interest at a fixed interest rate of 9.0 % per annum and will mature in October 2021.

The Company had a promissory note payable which had a balance of $ 0.2 million at December 31, 2020, and was paid in full as of December 31, 2021.

The Company has an uncommitted letter of credit facility (the “facility”) of up to $ 35.0 million, which is available to cover the issuance of debt support standby letters of credit.

The Company had used $ 17.0 million in debt support standby letters of credit as of December 31, 2020, and $ 16.8 million as of December 31, 2019.

Of the debt support standby letters of credit outstanding, $ 16.8 million as of December 31, 2020, and $ 16.3 million as of December 31, 2019, satisfies workers’ compensation insurer’s collateral requirements.

The Company had used $ 18.0 million and $ 17.0 million in debt support standby letters of credit as of December 31, 2021 and 2020, respectively.

Of the debt support standby letters of credit outstanding, as of December 31, 2021 and 2020, $ 18.0 million and $ 16.8 million, respectively, satisfied workers’ compensation insurer’s collateral requirements.

There is a service fee of 1.2 % on the used portion of the facility.

2 unchanged sentences

The Company intends to renew this facility prior to its August 31, 2022, expiration.

In May 2020 the Company entered into a new $ 100 million unsecured revolving credit facility (the “ 364 -Day Credit Agreement”).

Borrowings under the 364 -Day Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR plus an applicable margin.

The 364 -Day Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of December 31, 2020.

There were no borrowings under the 364 -Day Credit Agreement as of December 31, 2020.

In March 2021, the Company entered into an amendment to extend the maturity of its $ 100 million unsecured revolving credit facility (the “Credit Agreement”) to May 2024.

Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR, or an alternative base rate, plus an applicable margin.

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of December 31, 2021.

There were no borrowings under the Credit Agreement as of December 31, 2021 or December 31, 2020.

Note K—Income Taxes

8 unchanged sentences

$ 205,154 $ 115,606 $ 171,082

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income before the provision for income taxes for the years ended December 31, 2021, 2020 and 2019, consisted of the following (in thousands):

4 unchanged sentences

$ 803,780 $ 421,882 $ 625,515

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:

8 unchanged sentences

Tax impact of uncertain tax positions 0.3 0.1 0.2

Tax effects of TCJA — — 0.4

Other, net ( 0.9 ) ( 0.4 ) ( 0.5 )

6 unchanged sentences

Depreciation ( 2,286 ) 6,732 3,526

Unrealized gains from investments held in employee deferred compensation trusts 8,167 14,882 11,674

Other, net 5,000 ( 1,260 ) 2,153

4 unchanged sentences

Employee deferred compensation and other benefit obligations $ 155,064 $ 128,702

Deferred revenues, foreign royalties and management fees 16,034 —

Deferred Payroll Taxes (CARES Act) 13,355 27,086

9 unchanged sentences

Property and equipment basis differences ( 23,305 ) ( 25,555 )

Unrealized gains from investments held in employee deferred compensation trusts ( 34,001 ) ( 26,224 )

Right-of-use assets ( 43,986 ) ( 49,833 )

3 unchanged sentences

Total deferred income tax assets, net $ 134,036 $ 112,903

Credits and net operating loss carryforwards primarily include tax-effected net operating losses in foreign countries of $ 27.6 million that expire in 2021 and later;

and California enterprise zone tax credits of $ 2.2 million that expire in 2023.

Credits and net operating loss carryforwards primarily include tax-effected net operating losses in foreign countries of $ 22.8 million that expire in 2022 and later, and California enterprise zone tax credits of $ 1.6 million that expire in 2023.

Of the $ 1.6 million of California enterprise zone tax credits, the Company expects that it will utilize $ 0.4 million of these credits prior to expiration.

12 unchanged sentences

Balance at end of period $ 11,264 $ 9,785 $ 9,354

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 9.8 million, $ 9.3 million and $ 8.3 million or the years ended December 31, 2020, 2019 and 2018, respectively.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 11.3 million, $ 9.8 million and $ 9.3 million for 2021, 2020 and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.

The total amount of interest and penalties accrued as of December 31, 2020 was $ 0.5 million, including less than $ 0.1 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2021, is $ 0.4 million, including a $ 0.1 million decrease recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2020, was $ 0.5 million, including less than a $ 0.1 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2019, was $ 0.5 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2018, was $ 0.3 million.

The Company does not believe it is reasonably possible that the settlement of tax uncertainties will occur within the next twelve months.

77 unchanged sentences

Non-Executive Officer

Time Based Awards

Performance Based Awards with Market Conditions Performance Based Awards without Market Conditions Total Awards with Performance Condition

Time-Based Awards Performance-Based Awards With Market Conditions Performance-Based Awards Without Market Conditions Total Awards With Performance Condition

Units Weighted

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The risk consulting and internal audit services segment provides business and technology risk consulting and internal audit services.

The accounting policies of the segments are set forth in Note A—Summary of Significant Accounting Policies.

The Company evaluates performance based on income from operations before net interest income, intangible amortization expense, and income taxes.

The accounting policies of the segments are set forth in Note A.

The Company evaluates performance based on income before net interest income, intangible assets amortization expense and income taxes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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Intersegment revenues between temporary and consultant staffing segment and risk consulting and internal audit services segment were $ 580.4 million, $ 240.0 million and $ 172.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Revenue and direct costs related to the intersegment activity are reflected in the risk consulting and internal audit segment, including the costs of candidate payroll, fringe benefits and incremental recruiter compensation.

Assets by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is such information used by management for purposes of assessing performance or allocating resources.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note Q— Quarterly Financial Data (Unaudited)

The following tabulation shows certain quarterly financial data for 2020 and 2019 (in thousands, except per share amounts):

2020 One Two Three Four

Service revenues $ 1,506,691 $ 1,108,326 $ 1,189,897 $ 1,304,086

Gross margin $ 614,388 $ 416,535 $ 467,346 $ 514,342

Income before income taxes $ 131,763 $ 58,024 $ 102,510 $ 129,585

Net income $ 89,915 $ 46,196 $ 75,749 $ 94,416

Basic net income per share $ .79 $ .41 $ .67 $ .84

Diluted net income per share $ .79 $ .41 $ .67 $ .84

2019 One Two Three Four

Service revenues $ 1,468,530 $ 1,516,385 $ 1,552,132 $ 1,537,385

Gross margin $ 605,401 $ 636,589 $ 646,278 $ 636,861

Income before income taxes $ 147,383 $ 160,103 $ 163,782 $ 154,247

Net income $ 109,798 $ 114,612 $ 117,181 $ 112,842

Basic net income per share $ .94 $ .98 $ 1.02 $ .99

Diluted net income per share $ .93 $ .98 $ 1.01 $ .98

Note R— Subsequent Events

Note Q—Subsequent Events

On February 10, 2022, the Company announced the following:

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Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which management expects will apply to taxable income in the years in which those temporary differences are recovered or settled.

Management also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts.

Management also evaluates the need for valuation allowances to reduce deferred tax assets to realizable amounts.

In determining the realizability of its deferred tax assets, management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized.

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These procedures included testing the effectiveness of controls relating to income taxes, including management’s controls over the application of current enacted tax laws and published tax guidance and their impact to the current year provision, the establishment of deferred tax assets and liabilities, and the evaluation of the realizability of deferred tax assets.

These procedures included (i) testing the provision for income taxes and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

These procedures also included, among others, (i) testing the provision for income taxes and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and

measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data